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Interest rate on MoMo loans to go up

Interest rate on MoMo loans to go up

Amid rising interest rates on the money market, Chief Executive Officer of Letshego Ghana, Arnold Parker, has revealed that interest rates on Qwikloans will increase in the coming weeks.

Qwikloan, an innovative financial solution by Letshego Ghana and MTN Mobile Money (MoMo), provides short-term, unsecured, quick and convenient loans to subscribers of MTN mobile money – which are currently at 42 million in total since inception. Updating investors and other stakeholders during the Fact Behind the Figures held at the Ghana Stock Exchange (GSE), Mr. Parker said: “If not for some measures we have taken, what would have happened is that not only would margins have shrunk but our interest expense would have been more than interest income; because as we speak now, the Treasury bill rate is higher than our interest rate”.

A 30-day Qwik loan now carries an interest rate of 6.8%. However, lenders impose a 12.5% fee on borrowers who fall behind on their payments.

As of June 20, 2022, Treasury rates have risen from 12.52 percent in early January 2022 to 24.68 percent.

The CEO stated, “Unfortunately for our customers, we have to immediately alter our tariffs.

Mr. Parker further disclosed that there are approximately 42 million loans. We disburse an average of GH10 million in loans per day, according to the statement. That works out to about Gh300 million per month. Technically, that equals GH2.6 billion annually.

Therefore, working with our partners Jumo and MTN has been a great learning experience. We have learned a lot about customer behavior, repayment behavior, and how to plan loans and repayments so that collections remain as high as possible.

So, it’s still in construction. There is still a great deal to be done in that area. And hopefully, we’ll pay more attention to that in the years to come,” the CEO said.

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He said that the Ghana Card and the E-levy have had a minor impact on loan intake.

Most users of mobile money services have reduced the number of funds held on their mobile wallets in order to avoid the E-levy charges. This has lowered the loan amounts customers qualify for.

However, he is certain that customers will come to realise the exemptions – which should get them back onto the platform.

“I’m sure; eventually, when they realise that there are a lot of exemptions, they may come back. And so, what we’ve seen is that because they don’t use their wallets often, they are now also qualifying for lower amounts. And so those are the learnings, and we need to immediately reprogramme our algorithms to take care of those,” he said.


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